Trouble for telcos: Cellnex revenues €2.57bn, up 46% but €17.1bn in debt

Now growth fuelled by acquisitions, low interest rates is no longer viable, higher rents are inevitable

The European towerco, Cellnex, reported revenues of €2.57 billion for the first nine month of the year, up 46% compared with last year.

The growth is mostly due to acquisitions. Earlier this year it failed in its bid to acquire stakes in Deutsche Telekom’s tower estate in Germany and Austria, and last week lost out in its attempt to secure a holding in Vodafone’s Vantage Towers.

It is, though, on the final lap of acquiring of CK Hutchison’s European tower sites for €10 billion, having had to jump through some regulatory hurdles, and is close to securing the UK assets.

Overall, in the first nine months Cellnex has lost €255 million and its debts stand at €17.1 billion in the wake of its acquisition spree, fuelled by cheap money.

Infrastructure is a long-term play – a steady, predictable income over many year and Cellnex has close to 105,000 operational tower sites (see table) and plans to construct another 21,000 sites by 2030.

Still the rapid growth of towercos and data centre firms has been fuelled by cheap money and, as the Financial Times points out [subscription required], share prices in Cellnex and other towercos, along with data centre owners have suffered sharp drops in their share price since June as markets fret about their huge debts and the rising cost of capital as interest rates rise.

Although Cellnex holds much of its debt at fixed interest rates, about €2 billion of its debt matures in 2024.

As we move out of the post-2008 crash era, into one of higher inflation and interest rates, it will be interesting to see how well towercos and data centre owners can adapt their business models to the different economic climate.

Higher rents are inevitable. Which telcos that impacts, how much and when is no doubt already the subject of detailed study.